Von Keunheim took BMW from small time to big leagues

By 1969, Herbert Quandt could barely see to work.

The German industrial titan had taken control of a moribund BMW a decade earlier, just to keep it out of the clutches of Daimler-Benz, and he had put the company on solid footing.

But Quandt had been plagued with poor eyesight since childhood, and at 59, his vision had deteriorated to the point that he evaluated car designs by having scale models made so he could rub his hands over the contours.

His wife, Johanna, read all important business correspondence to him. And he formed opinions and made decisions based on the subtle notes he heard in the voices of his executives.

At the Frankfurt auto show in September 1969, Quandt announced he would turn over the reins to a little-known, 41-year-old machine tool executive: Eberhard von Kuenheim.

The choice bewildered the German auto industry and infuriated many of the company's top brass. But there was something about von Kuenheim's solemn baritone. He came from proud Prussian stock, and his slow, measured, elegant speech filled the sightless Herbert Quandt with vision and confidence.

Von Kuenheim would remain in the job from 1970 to 1993. Indeed, only Alfred P. Sloan of General Motors stayed longer among CEOs of major carmakers who didn't own their companies. And probably no single car brand ever advanced in public esteem as much as BMW did during von Kuenheim's 23-year span.

Still, BMW's senior leaders at the time deemed the young engineer unqualified. The new man clashed immediately with the company's most prominent executive -- sales chief Paul Hahnemann, a central figure in the first decade of BMW's revival under Quandt.

Famously, Hahnemann called von Kuenheim's appointment "the most expensive apprenticeship program in the car industry."

Germany's automotive press initially dismissed the new man as a kind of glorified clerk serving the owner. But von Kuenheim's elevation to power was no fluke. Two years earlier, Quandt had given him a daunting assignment -- take charge of Industrie-Werke Karlsruhe Augsburg, a troubled machine tool company in the Quandt group. Von Kuenheim quickly returned the firm to profitability, and he soon put his stamp on BMW.

At the crossroads

BMW was at a crossroads in 1969, and not just because of the owner's failing eyesight.

"I came in 1970 when BMW was selling 140,000 cars a year," von Kuenheim told me in a 2004 interview. "The year before it had turnover of one billion deutsch marks [about $1.6 billion in U.S. dollars in 2016, or less than a third of Tesla's revenue last year]. That was a fixed point. Quandt wondered what to do with BMW, because it was very small."

Von Kuenheim mulled the problem. "The experts said you could only succeed if you produce 500,000," he said. "We didn't have enough money, capacity, research or development people. When you are small, you have only one chance -- to produce more expensive cars. Higher turnover or higher volume? We went for the premium sector.

"How do you come out of that mousetrap -- to become bigger or go in a special sector niche? You go some place where there is more or less no competition. We had a luxury sporty car. Good engine, good handling and we got as high a price as possible. The VW Beetle sold for 4,500 to 5,000 marks in those days. I remember the BMW management board said, "Let's take 1,000 more, 20 percent more.' We had a fight on the board and decided 1,000 was not enough. We decided in 1970 to take 3,000 more."

Richard Gaul, a newspaper reporter covering BMW at the time, once said: "When Kuenheim took over he changed BMW from a small company owned by a rich investor into a real company."

He said von Kuenheim's first important move was to invest in a new assembly plant in Dingolfing, which was near Munich but, significantly, not in Munich.

"This was a brave decision taken as it was during the first oil crisis," said Gaul, who later became BMW's head of public relations.

'One of the secrets'

Von Kuenheim made other changes, too. He ignored Germany's rigid seniority system and put young men in top jobs at BMW -- like Bob Lutz, hired away from Opel to replace Hahnemann as head of sales. Von Kuenheim believed in manufacturing flexibility as the way to remain small but independent. And he was an early advocate of the value of electronics in cars.

Von Kuenheim also changed the way automakers dealt with suppliers, insisting that they innovate. In return, he promised to protect their work. BMW would not take the best of Bosch or Siemens or Zahnradfabrik and bid out their technology to others that could produce it more cheaply. The strategy won the loyalty of suppliers.

While BMW built up engineering prowess, it needed to find a better way to go to market.

"It was a company guided and controlled by engineers," von Kuenheim said. "We had excellent technical content. We had the best chassis, best engine, best handling. But we had no sales organization."

Von Kuenheim and Lutz concluded in 1972 that the company needed to take control of its national importers around the world. Because of Hahnemann's network of private distributors, von Kuenheim said, BMW barely broke even on cars sold outside its home market.

"It was a very important decision to take control of the importers," von Kuenheim said. "They all were millionaires, and we said we could use that money. I had very good help from a man named Bob Lutz. That was one of the secrets."

BMW also needed to break out of its home region.

"We were very provincial," von Kuenheim said. "Not a European company, not even a German company. It was a Bavarian company."

Of course, BMW is still a Bavarian company at heart. And for nearly a half-century, von Kuenheim, now 87, has been a towering figure in the region.

Ralph Robins, who ran the aircraft engine maker Rolls-Royce PLC, said: "I remember walking into a restaurant with him in Munich, and the whole restaurant fell silent."

A former lieutenant once told me: "He was the most demanding guy I ever met in every respect. He always asked for intelligent solutions. If I complained that "Daimler has a lot of money to do things,' he would say, "if you come up with an intelligent solution, you will have a lot of money as well.'"